Caterpillar Inc.--Early 1990s
The assessment of opportunities and threats is the foundation upon which planners develop strategies. The Caterpillar case illustrates some of the problems associated with the identification of opportunities and threats, especially in a situation where previous successes are notable. Attempting to pattern long-term growth on the basis of previously valid assumptions is one of the classic dilemmas facing the strategic planner whether in consumer or organizational markets.
In addition, the shareholders at the big three automakers have sometimes had to force necessary changes.
Evaluate Caterpillar Inc.'s marketing and management strengths and weaknesses.
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Thus, while the company has successfully responded to the changing environment in which it competes, the company must address its remaining weaknesses as a matter of priority to take full advantage of new opportunities in developing countries.
In the United States, Caterpillar is competing in a mature industry. This means that for Caterpillar to increase its U.S. market share, it must take sales from competitors, rather than increase the size of the market.
a. Are there other major growth opportunities in the domestic market which have not been identified by Caterpillar? There are a couple of strategies Caterpillar could pursue to increase growth in the domestic market:
* To stimulate demand in the U.S., Caterpillar could lobby for Congressional support for major urban renewal projects. These projects are pressing for many cities (repair of bridges and highways) but many communities do not have funds to undertake these enormous projects. Note: At the time of this writing, President-elect Clinton had promised federal support for infrastructure renewal programs.
* Diversification into other related areas. The company's reputation for quality and innovation provide opportunities of penetration in some related markets such as solar powered equipment.
b. If the U.S. market is close to saturation, should Caterpillar maintain the majority of its manufacturing operations in the U.S.?
* If the company is unable to gain additional flexibility from its unionized workforce, it will need to either invest in additional automation to reduce the labor force or move more manufacturing jobs to other countries in which labor costs are lower. However, students should be asked to consider the impact on the U.S. economy and Caterpillar's labor force if jobs continue to go overseas.
* The company may also consider increasing the percentage of overseas manufacturing if the opportunities in the U.S. market continue to stagnate. If the company's main growth opportunities are in foreign countries, it may be more cost effective to invest in local manufacturing plants in these high growth markets.
* The risks of additional overseas production is in currency fluctuations and unstable economies in some areas. Caterpillar does not want to be overexposed to these risks as was the case in Brazil in 1990 when the Brazilian government devalued the currency.
* At this writing, the North America Free Trade Agreement is awaiting Congressional approval. The North America Free Trade Agreement would remove all existing trade barriers between Canada, the U.S., and Mexico. The agreement would create a common market in North America similar to the common market which currently exists in Western Europe. President-elect Clinton has voiced qualified support for this trade agreement. If the agreement is approved, Caterpillar could invest in plants in Mexico and take advantage of lower labor costs while still being able to market goods in the U.S. and Canada unrestricted by tariffs...